SMC NatGas Weekly Summary

Summary for Week Beginning March 7, 2021


Current Situation

In our last report dated March 1, we noted that the NYMEX natural gas futures market was resting about 30 cents lower than the previous week, at $2.771, after a week where the market opened at $2.934 on Sunday evening. It then headed lower in a fairly concerted manner to a new low point of $2.697 on Friday. Seasonally, we considered that our anticipated first upward swing of the January-March winter season concluded on February 17, at $3.316 and that our anticipated first downward swing was ongoing with a low point thus far of $2.697. Looking ahead, we said that our first downward swing had actually extended somewhat below the $2.75 area that we thought might be the lowest it would go. As such, we viewed this swing as something that could end at any time, especially should the very mild forecasts change.

As to how the latest week turned out, the 6-10 day forecast shifted somewhat bullishly by Sunday night, and the market opened about .03 cents higher, at $2.80. After a downward test to $2.724 Monday morning, it rode the more supportive 6-10 day and 3-4 week outlooks to a high of $2.887 before Thursday’s EIA storage report. The weekly EIA storage report was one of the most surprisingly bearish storage reports in a long time, coming in 38 Bcf’s below expectations at a 98 Bcf withdrawal. This trumped the somewhat more supportive temperature forecasts and the market gave back all the early week gains and more to fall back and close the week at $2.701. Seasonally, last week’s movement could fit with either some consolidation before a continuation of our first downward swing or consolidation before an upward reversal into a second upward wave. We’ll have to see how this plays out.

Factor Summary

  • Supportive: storage; supply/demand balance; oil
  • Neutral: cash
  • Negative: weather; seasonal forces; tech considerations


As to how winter seasonal movement is turning out, we have seen two distinct waves thus far. The first upward swing began off the December 28 low of $2.238 and peaked fairly late on February 17, after a $1.08 move to $3.316.  The first downward swing began off the February 17 high of $3.316 and dropped 62 cents, to a low of $2.697 on February 26.

The question at this point is how last week’s brief recovery movement up to $2.887 and subsequent drop to a new low of $2.681 last Friday fits into the seasonal big picture. We can’t answer that question yet. Conceivably, it might eventually count as part of the first downward swing or it might ultimately fit into the context of a second upward swing.

The most interesting thing that occurred last week was the surprisingly small weekly storage withdrawal reported by the EIA.   The industry poll that we watch has a couple of participants that usually come pretty close to the actual EIA number, but even they were in the 130 Bcf range compared to the actual 98 Bcf number. This sudden drop in storage withdrawals, compared to the similar weather week last year, implies that the supply/demand balance has loosened materially here as winter demand winds down. However, there is always the possibility of a reporting error or that an unreported adjustment was made, and so market participants will be watching the report very closely next week for confirmation of some kind. In the meantime, it appears that the alternative of a loosening supply/demand appears to be carrying the day in the market with it punching just below significant support of $2.700 in the waning hours of the week.

As to the coming week, the NYMEX natural gas futures market is currently resting .07 cents lower than the previous week, at $2.701, after a week where the market initially recovered from the mid $2.70s to $2.887, only to have a surprisingly low weekly storage withdrawal cause the market to give up its gains and decline to lower levels to end the week. Looking ahead, we look to the supply/demand (as indicated in the weekly storage report), to be the primary influence on the market with weather forecasts only a secondary influence. As to all factors affecting natural gas futures, please see Factor Summary above.


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